Union Bank of India, one of India’s largest state-controlled banks, reported a deterioration in its loan book quality and wider losses for the October-December quarter.

The bank posted net loss for Rs 1,250 crore for the quarter, compared to net profit of Rs 104 cr for the same quarter last year.

Higher provisions to deal with bad debt as well as a sharp drop in treasury income contribute to the losses.

In the preceding September quarter, the bank had posted net losses of Rs 1,531 cr.

The bank continued to see fresh slippages of good loans into bad loans or non-performing assets (NPAs).

It set apart another Rs 2,521 cr to cover for bad loans during the three months, on top of the Rs 3,465 cr set apart in the preceding quarter. In year-ago period, provisions for NPAs was Rs 1,582.

It said loans worth Rs 4,187 cr ‘slipped’ into non-performing assets during the three months.

As a result, the percentage of bad loans to the overall loan book increased to 13.03% from 12.35% three month earlier. A year ago, it had been at 11.7%.

It said it made fresh provisions of Rs 991 crore to deal with 18 non-performing accounts highlighted by the Reserve Bank of India. These cases have been referred to National Company Law Tribunal (NCLT) for debt recovery.

“The Bank has provided entire amount of additional provision for NCLT accounts upfront which was to be spread till March 2018,” it said.

After adjusting for the bad loans for which provisions have already been made, non-performing asset ratio was 6.96%, against 6.70% three months earlier and 6.95% a year earlier.

In addition to bad dept, the bank also wrote down Rs 700 cr as ‘depreciation on investment’ on its investment portfolio. This had been only Rs 81 cr in the year-ago quarter and Rs 166 cr in the previous quarter.

Union Bank saw growth in its interest income even as the margin between the interest it got on its loans and the interest it paid on its deposits widened, boosting its margins.

The margin between the two was a positive 2.23 per cent against 2.08 per cent for the preceding quarter and 2.01 per cent a year ago.

Looking only at the domestic market, net interest margin improved to 2.34 per cent for October-December 2017 as against 2.19 per cent for July-September 2017 and 2.04% a year ago.

This was because it was able to get an average of 6.67 per cent on its loans (yield), while paying an average of 4.61 per cent on deposits.

In the previous three months, the numbers had been 6.81 per cent and 5.34 per cent respectively.

However, the company also saw a decline in its non-interest income.

Total non-interest income for the quarter fell to 873 cr from 1,217 cr in the preceding three months and Rs 1,339 cr in the year-ago period. Within this, treasury income fell to Rs 155 cr from Rs 613 cr three months earlier and Rs 822 cr a year ago.